Preferred stocks give up early gains amid tepid trading; Urstadt Biddle, Citigroup price

By Stephanie N. Rotondo

Phoenix, Oct. 22 – The preferred stock market “faded at the last minute,” a market source said Wednesday.

The market had been up in early trading, but as the common equity market sold off, preferreds gave back a little too.

“The market was up about 5 [basis points] most of the day,” the source said. But then it erased those gains and finished flat.

However, a trader noted that activity in the space remained “pretty quiet across the board.”

Urstadt Biddle Properties Inc. announced that it had priced its proposed offering of series G cumulative redeemable perpetual preferred stock.

The company launched the deal on Tuesday, with price talk in a 6.625% to 6.875% range. The deal came at par to yield 6.75%.

The deal was also modestly upsized to $70 million from $61.25 million.

A trader said the new issue was “doing well” post-pricing, seeing a $24.98 bid for paper.

BMO Capital Markets was the bookrunner.

Also in the primary arena, Citigroup Inc. announced and priced $1.5 billion of 5.8% $1,000-par series N fixed-to-floating rate noncumulative preferreds.

Price talk was in the 6% area, according to a trader.

Post-pricing, a source said he was seeing a 100.125 bid for the preferreds, adding that the paper was “maybe an eighth to a quarter [point] higher” earlier in the session.

The dividend will be fixed until Nov. 15, 2019, at which point it will begin floating at Libor plus 409.3 bps.

Citigroup Global Markets Inc. was the bookrunner.

Proceeds will be used for general corporate purposes.

Among Citigroup $25-par preferreds, most of the structure ended the day with a softer tone. The most actively traded issue, the 7.875% fixed-to-floating rate trust preferred securities (NYSE: CPN), fell 2 cents to $26.93.

Fannie, Freddie firm

Fannie Mae and Freddie Mac preferreds were again dominating trading in that space as investors pushed the shares into higher territory.

Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) earned a nickel, or 1.27%, to close at $4.00 a share. Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) put on 2 cents, closing at $4.02.

Earlier in the week, the agencies said it was nearing a deal with its regulator that would allow banks to accept 3% down from borrowers with less-than-stellar credit. The deal is also expected to include when banks will be required to repurchase loans that turned sour.

The move toward requiring less money down on a new home could be good for buyers, but also for the housing market, which has not yet improved as much as some would have hoped.

However, the deal also has some investors scratching their heads, wondering if the two government-sponsored entities will ever be wound down, as many government officials have proposed.

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